RA 12066 (CREATE MORE Act) Key Points

• RA No. 11534, CREATE Act, enacted March 26, 2021, aims to enhance the national economy's global competitiveness by implementing tax policies that attract investments.
• It seeks to improve productivity, generate employment, promote countrywide development, and foster inclusive economic growth, while maintaining fiscal prudence and stability.
• Key objectives include improving the equity and efficiency of the corporate tax system by reducing the rate, widening the tax base, and reducing tax distortions.
• It also seeks to develop a responsive and globally-competitive tax incentive regime that is performance-based, targeted, time-bound, and transparent.
• The Act also intends to support businesses in recovering from unforeseen events and strengthen the nation's capability for future similar circumstances.
• It includes provisions for non-resident aliens engaged in trade or business in the Philippines, where certain passive income is taxed at 20%.
• Certain passive income covers cash and property dividends, share in net income of partnerships, interests from bank deposits, and royalties, with exceptions for books and literary works subject to 10% tax.
• Prizes exceeding P10,000 are taxable, while smaller prizes and winnings from PCSO amounting to P10,000 or less are exempt.
• According to the text, interest on any bank deposits is subject to 20% tax.
• The interest income coming from depository banks, under the expanded foreign currency deposit system, is taxed at 15%.
• The net capital gains from shares that are not traded in the stock exchange, for domestic corporations, face a 15% tax.
• Under the text, non-resident foreign corporations income from all sources within the Philippines is subject to a final withholding tax.
• A 25% rate is levied on gross income from all sources within the Philippines like interests dividens, rents, royalties, salaries, premiums, annuities, capital etc

Reduced Rate

• Dividends received from a corporations is subject to twenty-five percent (25%) final withholding tax.
• However, a reduced rate of 15% applies if the non-resident corporation's domicile country credits taxes equivalent to 10% or does not tax domestic corporation dividends.
• A reduced rate of Fifteen percent (15%) is applied, in the case of ONNET capital gains during the tax year.

Government Purchases

• Purchases by government entities are subject to a 1% withholding tax from July 1, 2020, to June 30, 2023.
• Tax refunds may be claimed if over-withheld.

Commissioner of Internal Revenue (CIR)

• The Secretary of Finance may request the CIR to furnish specific data on entities receiving Title XIII incentives, with justification.
• Requests must be authorized by the Secretary of Finance and identify the information and justification for the request under Title XIII of The Tax Code.
• Other BIR offices receiving such requests must forward them to the Commissioner.

Rules and Regulations

• Implemented on May 26, 2022, it addresses importation, transfer, and withdrawal of petroleum products from Freeport Zones and Economic Zones.
• Excise Tax or VAT for exported petroleum and petroleum products or transferred to international entities may be refunded after verification, filing claim for refund.
• In sales of petroleum and petroleum products within the customs territory (except fuel for use in international operations), no refund for taxes shall be granted for the product sold and must present paid taxes.
• Importation of petroleum products by a refining enterprise that the IPA shall be exempt from payment of duties and taxes under Section 295(G) of the Tax Code.
• The ATRIG must be secured from the BIR before releasing imported goods & pay the VAT and excise tax & obtain a Withdrawal Certificate.
• Tank facilities must be registered with the BIR with a Permit to Operate issued if storing petroleum or Permit to Operate Exempt Facility for non-Excise Tax items.

All Owners

• To present copies of documents like the BIR Certificate of Registration, the Blueprint Design of the storage facility
• Submit The Lease or Operating Agreement, if leased or operated by a different person, the Terminalling, Lease, or Storage Agreements with the lessee-owner(s)
• The Notarized agreement(s) with the lesseeowner(s) indicating tank number describing the product, containing both the tank number, a description of the product, and the volume of inventory.
• One major changes is an Introduction of 20 percent CIT rate for Registered Business Enterprises (RBEs)
• In response to OECD minimum rate fifteen percent, the 20% rate helps facilitate businesses to align with global standards
• Tax payers can avail enhance deduction on qualified expenses such as R&D

Enhanced Deductions Regime

• It Increase in deductible expenses and include New deductible expenses item like on trade fair and exhibit
• The ACT allows Net Operating Loss to be carried over for a period of five (5) years, and the intention provide Business with more significant tax relief.

Registered Business Enterprises

• Requirements to achieve status is eased Act is eases so both local and foreign business are eligible if they meets conditions
• Broadened range of cooperation that qualifies under EDR and SCIT

VAT exemption and Zero-rating

• VAT incentives applies to goods and services "directly attributable" to operation of a register company and is applied when it has appropriate
• Goods like janitorial, security , financial , consultancy, Operation etc. are inclusive
• Conditions applies for VAT exemption are described as VAT-free, Importation etc:

Conditions To Be Aware Of

• VAT Exempt: Importation of goods by an REE whose export sales are at Least 70%
• 0% VAT: sells of goods and services to ReE whose Export sales are at Least 70%. Or 0% VAT sales to bonded warehouses of REE
• treatment on sales of goods and service to the REE
• Create More ACT clarifies the treatment of VAT in the case of sale like sell or disposal of goods
• Special provision of High value domestic Market Enterprises may attract Investment sector that critical such Infrastructure, heavy and exports

Registered Business Enterprises Local Tax

• Companies including those enjoying tax holiday are subject to local tax 2 percent of Gross Income
• Applicable during ITH or EDR it anticipated that advantage will result enhanced for foreign investment , employment in a value added sectors.

Important Citation from Grant Thornton.com

• (https://www.grantthornton.com.ph/insights/articles-and-updates1/lets-talk-tax/the- create-more-act-ra-12066-a-new-chapter-for-tax-incentives-and-economic- development-in-the-philippines/)
• The Lung Center of the Philippines (LCP), a non-stock, non-profit hospital, contested real property taxes imposed by Quezon City in 1993, claiming exemption as a charitable institution.
• The petition is partially granted because, a charitable status is not simply because of income from paying patients.

St. Luke's Medical Center

• The Supreme Court was deciding on its tax rate for income tax
• The court ruled it subject to 10% under Section 27(4) of the 1997 NIRC as its revenue from paying patients is not considered "operated exclusively" for charitable purposes.
• The petition for review on the Court of Tax Appeals' (CTA) January 19, 1984 decision in favor of the domestic corporation Wander Philippines Inc., which argued that it was only responsible for a withholding tax of 15%,

Old Provision (NRC 1997)

• Section 20 is the: Submission of Report and Pertinent Information by the Commissioner
• Section 22: Definitions - The term corporation shall include partnership and various business types.

CREATE ACT

• Section 20 Submission of Report and Pertinent Information by Commissioner
• Report and Pertinent Information by Department in finance - The Secretary and relevant officers handling the data shall be covered by the provisions of Section 270 unless the taxpayer consent in writing to such disclosure.
• Submissions of report to oversight community - the commisioner also submits to oversight committee, a the report on the exercise power, and the definition of terms are maintained.
• Secion 22: Definitions - The term corporations shall include One Perosn Corporation and various business types.
• Section 25 : Tax on Non Resident Alien Individual - Various conditions of business related taxes like Property dividends etc.